Johannesburg's two most important utilities are in deep trouble.

City Power loses nearly a third of the electricity it purchases. The Auditor-General's 2023/24 findings recorded R4.9 billion in electricity losses, caused mainly by illegal connections, damaged and bypassed meters, technical losses, and billing failures. The utility also reported a R2.8 billion net loss, while the Auditor-General raised material uncertainty about its ability to continue as a going concern.

The crisis is now affecting the wider city. In May 2026, Eskom announced that the City of Johannesburg and/or City Power owed R5.2 billion in arrears, excluding a further R1.5 billion current account. Eskom warned that supply interruptions could follow.

Meanwhile, Johannesburg Water faces a different version of the same problem. Its 2025/26 business plan records non-revenue water of 46.2% in 2023/24. In other words, almost half the water entering the system generated no proper revenue because it was lost through leaks, theft, metering failures, or authorised but unpaid consumption. On top of this, there is the water that is invoiced but is never paid.

The infrastructure backlog is equally severe. Johannesburg Water estimates that it needs to replace roughly 186km of water pipes and 178km of sewer pipes each year to maintain the network properly. Yet in 2023/24 it replaced only 17km of water pipes, contributing to an infrastructure renewal backlog estimated at R32.5 billion.

These are not temporary setbacks. They are symptoms of a deeper governance failure. In short, Johannesburg does not merely have a utility problem. It has a utility model problem.

The Case for Concessioning City Power and Joburg Water

The problem is not that City Power and Joburg Water are separate entities. The problem is that they are not run like real utilities.

Both entities collect revenue, buy bulk inputs, maintain networks and require long-term capital investment. Yet neither operates within a system that properly protects revenue, enforces maintenance spending, or imposes meaningful consequences for failure. Utility cash is treated as City of Johannesburg cash, while losses, backlogs, and debt continue to grow.

The solution is not to abolish these entities. The solution is to turn them into genuine utilities: ring-fenced, professionally governed, and accountable for measurable outcomes.

City Power and Johannesburg Water are fundamentally different from most municipal entities. They are network utilities with clear revenue streams, identifiable customers, measurable service standards, and significant infrastructure requirements. That makes them suitable candidates for concession-style operating models.

The purpose of a concession is not privatisation. It is discipline. It forces the City to stop treating utilities as cash cows, protects revenue for maintenance and capital renewal, and makes service delivery measurable.

What Concessioning Would Look Like

A concession is not the sale of City Power or Johannesburg Water. It is a long-term contract under which the City retains ownership of the assets, sets policy, approves tariffs, and protects poor households, while an external operator takes responsibility for day-to-day operations and infrastructure management.

Water and electricity should be concessioned separately. They are different businesses facing different challenges and require different expertise.

For Johannesburg Water, the City would remain the Water Services Authority, while the operator would manage the network, maintain infrastructure, reduce water losses, improve billing and collections, and meet agreed service standards. Performance-based remuneration can be designed, with remuneration to the private party being a function of contractual key performance indicators being met and revenue turnaround being achieved. In practice, the operator might receive 25 cents for every rand of non-revenue water eliminated within a specified region. This would focus energy on preventing leaks and theft.

According to Anthony Still, who formed Johannesburg Water and was its initial managing director, and who also has experience in public-private partnerships, a number of separate concessions are in the preparation stage but have not proceeded as quickly as they could have:

• •A new wastewater treatment works in the Lanseria area: Capital investment of approximately R4.5 billion, funded partly by National Treasury’s budget facility for infrastructure, will be necessary to develop the facility;
• •Reuse from existing wastewater treatment works: Johannesburg’s four larger treatment works have the potential capacity to retrofit reuse plants. Solid waste can be converted to methane, which can be used to generate electricity. A portion of the liquids stream can be further treated into potable water and returned to the network; and
• •Water network loss reduction: The three greatest areas of water loss relate to property leaks, poor pressure management, and leaking reservoirs. Private sector specialists will be contracted to reduce losses in specified zones, with remuneration being a fraction of the water saved. Experts estimate that this could reduce the City’s bill with Rand Water by over R1 billion.

For City Power, the City would retain responsibility for electricity reticulation, while the operator would manage the network, reduce losses, maintain infrastructure, improve revenue collection, and implement a long-term capital programme.

The City remains accountable for the service. The concessionaire becomes accountable for performance. Ultimately, the objective is to create utilities that are professionally managed, financially disciplined, and accountable for measurable results.

The Problem is Not Only Corruption

A popular explanation for Johannesburg’s collapse is corruption. This explanation is not wrong, but it is incomplete.

The deeper problem is that the City's most important utilities are not run like utilities. They are monopoly network businesses that require disciplined revenue management, long-term capital investment, and rigorous maintenance. Instead, they are often treated like political departments, with weak financial discipline and inadequate protection of utility revenue.

That is the real governance failure. Residents pay for electricity and water, yet too much of that money fails to reach the bulk suppliers and infrastructure on which those services depend.

Ring-fencing Is the Key Reform

The most important part of the reform is not actually the concession. It is the ring-fencing of utility revenue.

All electricity and water revenue should flow into separate utility accounts and be used for utility purposes only. The money should follow a strict order of priority: bulk suppliers such as Eskom and Rand Water first, then operating costs, maintenance, capital expenditure, refurbishment, and debt obligations. Only thereafter should any surplus dividends flow to the City.

This is the principle that Johannesburg has repeatedly failed to enforce. Eskom's criticism that the City collects electricity revenue while failing to pay Eskom's share illustrates the problem perfectly.

No concession will succeed if utility revenue can still be diverted to general municipal spending. Electricity revenue must pay Eskom and maintain the grid. Water revenue must pay Rand Water and maintain the network.

Until water money fixes water and electricity money fixes electricity, no turnaround strategy will succeed.

Measuring Outcomes

The success of a concession should be measured by outcomes, not promises.

Too many municipal turnaround plans focus on strategies, workshops, and organisational charts. Residents care about whether the lights stay on, whether water comes out of the tap, and whether infrastructure is being maintained.

For City Power, the key measures should include electricity losses, Eskom arrears, outage frequency and duration, customer response times, smart meter installation, revenue collection rates, and annual investment in network renewal.

For Johannesburg Water, the focus should be on non-revenue water, pipe replacement, sewer spill incidents, wastewater treatment compliance, response times to leaks and bursts, reservoir reliability, and revenue collection.

The City should publish these indicators periodically through a public dashboard. Residents should be able to see whether losses are falling, infrastructure investment is increasing, and service delivery is improving.

The concessionaire should face financial penalties for failing to meet agreed targets and should only earn performance bonuses for independently verified improvements. Progress should be audited and reported publicly.

The principle is simple: what gets measured gets managed. If Johannesburg wants better utilities, it must create a system in which performance is visible, measurable, and impossible to ignore.

The Legal Process

Be under no delusion: concessioning City Power and Johannesburg Water will be a long and complex process.

In practice, Johannesburg would need to follow the prescripts of section 78 of the Municipal Systems Act. Council would appoint a project team and transaction advisers, undertake detailed feasibility studies, consult communities and labour unions, assess affordability and value for money, and determine whether concessioning would deliver better outcomes than continued municipal operation. Ideally, the Council should explore trying to obtain an exemption from the worst of the red tape in light of the existential emergency which Johannesburg faces.

The procurement process would be particularly arduous. The municipal public-private partnership regulations require detailed feasibility work, Treasury consultation, affordability assessments, value-for-money analysis, risk-allocation studies, and competitive procurement. National Treasury and Provincial Treasury must be given an opportunity to comment on key procurement documents and preferred bidder assessments before contracts are awarded.

That complexity is not a flaw in the system. It is a safeguard. A concession would transfer responsibility for critical infrastructure worth tens of billions of rand. The City should therefore be required to prove that the arrangement is affordable, legally sound, technically credible, and capable of delivering better outcomes than the status quo.

Ultimately, the goal is to create a concession that is transparent, competitive, bankable, and durable enough to survive changes in political leadership over the next two or three decades.

Successful Precedents

This may all sound daunting, but South Africa already has experience with utility concessions.

The best-known example is Siza Water on the Dolphin Coast in KwaZulu-Natal (Ballito and surrounding areas). Established in 1999 as a 30-year concession, Siza was granted responsibility for operating, maintaining, and expanding water and sanitation services while the public authority retained ownership of the assets and responsibility for policy. The concessionaire purchased bulk water, maintained infrastructure, and invested in network improvements.

The overall record is impressive. Various studies note improvements in water quality, maintenance, fault response, revenue collection, and water-loss management. Siza inherited water losses of roughly 33% and reduced them substantially. It has also maintained collection rates of around 95% to 98%, achieved high Blue Drop scores and generated profit-sharing payments to the municipality.

A second example is the Silulumanzi concession in Nelspruit, which has operated water and sanitation services for more than two decades under a long-term concession agreement. Like Siza, it demonstrates that public ownership and private operation can coexist within a regulated framework.

These examples also provide important lessons. Both concessions encountered challenges, including inaccurate demand forecasts, deteriorated inherited infrastructure, and disputes over tariffs and risk allocation. They succeeded not because the private sector possesses some special magic, but because the concessions created clearer accountability, stronger operational discipline, and greater protection for utility revenues.

No precedent is perfectly comparable to Johannesburg. City Power and Johannesburg Water are larger and more complex than either Siza or Silulumanzi. Nevertheless, these examples demonstrate that concession-style utility management is neither radical nor untested. South Africa has already shown that it can work.

Guarding Against Dangers

A concession is not a guaranteed success. If designed badly, it could leave Johannesburg worse off than before.

The first risk is a flawed procurement process. A concession for City Power or Johannesburg Water would be one of the largest municipal contracts ever awarded in South Africa. It would inevitably attract political, commercial, and criminal interest. The procurement process must therefore be unusually transparent and subject to rigorous scrutiny.

The second risk is poor information. If the City does not understand the true condition of its assets, the scale of its losses, the quality of its billing data, or the extent of its maintenance backlog, it will negotiate from a position of weakness. A successful concession requires an honest baseline which should be set out in the first year.

The third risk is bad risk allocation. If every risk is transferred to the operator, bidders will either walk away or demand excessive returns. If the City retains all the risks, the concession serves little purpose. Risks should be allocated to the party best able to manage them.

The fourth risk is tariff shock. Utilities must eventually recover their costs, but tariff reform must be gradual, transparent, and accompanied by explicit protection for poor households.

The fifth risk is labour conflict. Employees should be engaged from the outset and the model should include training, skills transfer, and fair transition arrangements in terms of section 197 of the Labour Relations Act. A successful concession should improve institutional capacity rather than simply replace it.

The greatest risk, however, is municipal weakness. A concession does not eliminate the need for capable government. It changes the role of government. The City stops being the operator and becomes the regulator, contract manager, and guardian of the public interest.

The Importance of a Capable Contract Management Unit

This gives rise to a critical point: a concession only works if the City becomes a better client.

Johannesburg does not merely need a competent operator. It needs a hard-nosed contract management unit (CMU) capable of monitoring performance, enforcing contractual obligations, and protecting the public interest. This unit should be staffed by engineers, accountants, lawyers, procurement specialists, data analysts, and anti-corruption investigators. Fortunately, South Africa has many such experts who could play a role in the CMU – if only a stable government gave them the chance. The CMU will report directly to the City Manager.

The CMU’s role would be to monitor performance, approve capital programmes, audit open-book accounts, verify loss-reduction claims, publish public dashboards, and enforce penalties where operators fail to meet agreed targets. To enable this oversight, the concession contract should require public reporting on outages, water interruptions, losses, collections, infrastructure renewal, and capital expenditure, supported by independent audits, open-book accounting, financial penalties for missed targets, municipal step-in rights, and termination rights where performance falls below agreed standards.

That oversight is critical. Studies of utility partnerships consistently show that the greatest risk is often not the operator, but weak public-sector capacity. A concession with poor oversight can fail. A concession with strong oversight can transform performance.

The objective is simple: the City should stop trying to do everything itself and start ensuring that essential services are delivered effectively, transparently, and accountably. The principle is that the government focuses on policy and regulation while competent managers who are driven by performance focus on operations.

The Choice

Three facts are indisputable.

Firstly, City Power cannot continue losing a third of the electricity it purchases while owing Eskom billions of rand. Secondly, Johannesburg Water cannot continue losing almost half the water that it purchases from Rand Water while replacing only a fraction of the infrastructure required to sustain the network. Thirdly, no turnaround plan will succeed if utility revenues remain vulnerable to political interference and maintenance continues to be deferred.

And so, Johannesburg faces a choice. It can continue with the current model and hope that another turnaround plan succeeds where so many others have failed. Or it can accept that City Power and Joburg Water require a fundamentally different operating model.

Concessioning these utilities will not be easy. It will require political courage, rigorous planning, extensive consultation, and strong municipal oversight. Done badly, it could fail. Done well, it could restore financial discipline, accelerate infrastructure renewal, and improve service delivery for millions of residents.

Ultimately, it could form the centrepiece of the turnaround of South Africa’s most important city.